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November 30, 2015

5 things to know about the health product pipes

Liazon say health exchanges tend to create gorillas.

The third annual Patient Protection and Affordable Care Act (PPACA) open enrollment period has been under way for four weeks now, many employers are smack dab in the middle of their annual enrollment periods, and one point is clear: Everyone is exhausted.

When a holiday like Thanksgiving rolls around, a one-day holiday morphs into a four-day weekend, and from that it into a four-day weekend that absorbs the preceding Wednesday and most of the following Monday.

Clients' and prospects' phones roll over into voicemail. The email inboxes have their automatic out-of-office reminders turned on. The group health plan enrollees and should-be-enrollees who are at work are struggling to escape from the gravitational pull of Amazon.com, because, given all of the layers of employees that have been eliminated, the amorphous management structures that have been adopted, and the dozens of "this will just take one-minute" tasks that the Internet has added, those workers are, in many cases, worn out.

Meanwhile, agents and brokers are operating at top speed. They're racing to shift victims of insurer failures and plan withdrawals into new coverage by Jan. 1.

They're rushing to get older clients into Medicare plans by Dec. 7; to help any individual working-age clients they still have get into individual coverage by the applicable state's enrollment deadline for policies that start Jan. 1; and to keep up with all of the administrative work associated with the other products they sell.

All without having much of an idea about which insurers will actually pay them the compensation that was "promised."

But some agents, brokers, and distribution-related organizations have found the time to communicate with us in recent weeks.

For five peeks at what they've been telling us, read on.

1. Joe Ellis of CBIZ sees a surprising amount of employer surprise about what he's known was coming since, roughly, 2010.

Most CBIZ clients are employer groups with 50 to 2,500 employees. Ellis, a senior vice president at the company, said renewal increases for the large groups are about what they were a year ago. For small groups, because of PPACA-related changes, increases are higher for some and lower for others.

Most of the clients are just trying to comply with PPACA and other benefits laws, not using tricky grandfathering, grandmothering or plan-year calendar gimmicks to put off having to comply PPACA rules.

"I think few employers worried about the counting issues until the last six months of this year," Ellis said. "Now it's a big deal. Far greater than we ever thought."

CBIZ "had solutions to help clients in the spring, but it was difficult to get their attention," he said. "Getting clients to appreciate what had to be done, and by when, was a challenge."

2. Liazon has scientific proof (or, at least, scientific-sounding evidence) that the incumbent plan in an exchange has a strong tendency to turn into a GORILLA.

Liazon, a private exchange company, put analysts to work crunching data from a private exchange that serves U.S. employers with an average of 8,000 covered lives each. The employees using the exchange could choose from a menu of plans from four carriers in most markets, and from five carriers in a few markets.

The analysts found statistical support for the idea that consumers tend to pick a carrier and then stick with it, even if rates at the incumbent carrier go up more than rates at the other carriers.

If a carrier wins a big market share early on, the incumbency effect may turn it into a dominant exchange gorilla, the analysts conclude.

The incumbency effect is so big that, if all other factors, including premiums, were magically held equal, the incumbent carrier in a four-carrier market would probably end up with a 53 percent share of the market. The three other carriers would end up with an average share of just 16 percent each, according to the analysts' calculations.

An incumbent could still keep 25 percent of the market, on average, even if it increased its premiums 8 percent over what competitors were charging, the analysts estimate.

The analysts say an incumbent gorilla will usually have an easy time keeping enrollees because of fear of change; brand familiarity; inertia; and provider network access concerns.

"Non-incumbents, starting with [about] 16 percent market share, will have less flexibility and must price [about] 3 percent lower than average simply to realize a 25 percent market share," the analysts say.

3. HAFA, a group for health agents, is going to take a more systematic approach to going to Washington, and to state capitals.

Elena Marino, HAFA's vice president of regulation, has helped connect the group with the Business Coalition for Fair Competition, a group that helps members fight what they believe to be unfair government-sponsored competition.

"By choosing the profession of an independent agent, you have chosen to make your living in one of the most heavily regulated industries in the country," the PAC says on its website. "Therefore, you must be involved in politics. Each year, laws are passed and regulations released that impact your clients and affect your ability to make a living. Sitting it out is not an option."

HealthMarkets Insurance Agency says it has hired Patrick O'Toole to help it shift more toward the sale of supplemental insurance products, and away from the sale of major medical coverage.

O'Toole previously was a vice president and retail insurance product segment leader at Humana Inc. (NYSE:HUM). Earlier, he served in the U.S. Army for 11 years. He has a bachelor's degree from Wayland Baptist University.

HealthMarkets also has promoted Derrick Duke to executive vice president and chief financial officer, and it has promoted Rich Bierman to executive vice president and general counsel.

5. Some brokers are still working with the PPACA public exchange system.

The PPACA public exchange system continues to fight technical glitches. It faces more budget pressure, and, in some cases, it may face employee and volunteer fatigue.

But tens of thousands of brokers are buckling down and doing what they can to make the system work for their clients.

In California, for example, KeenanDirect, an insurance brokerage and consulting firm, helped California's state-based exchange, Covered California, bring a statewide bus tour promotional campaign to San Francisco earlier this month. When the bus stopped in the city, Keenan representatives helped about 80 consumers learn about the exchange and sign up for coverage.

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